They Tax, We Export - Part 2

Dealing with Latin American import duties

In our last blog post, we discussed the issue of import duties and how protectionist measures in Latin America can deter British businesses from considering these markets. With import duties of up to 60%, the deterrents are clear. However, the opportunities are clear as well. To start with, not every product or service will be taxed at 60% or even at 30%. Some products will actually enter Latin American countries at 0% import duty – the ones that these countries have identified they need to import.

We also discussed how to still be competitive in these highly-protectionist countries. We discussed the importance of having a high-value niche product, and the importance of Britishness to sell in Latin America.

There are other ways of addressing high import duties. How you exercise these options will depend on your strategy and your plans for Latin American expansion:

-          Free trade zones – across all of Latin America, the “zonas francas” can make your life a lot easier in terms of tax incentives, human resources, infrastructure, inventory, logistics and more. It is worth considering them as an option.

-          Reciprocity – in Brazil, for example, you are much more likely to succeed in importing into the country if you can demonstrate that you are also exporting from it – so joint ventures that can prove a two-way trade will have an advantage.

-          Assembling – whether you manufacture smartphones, vacuum cleaners or prams, there will be huge tax incentives if you employ local labour in assembly factories – a strategy commonly employed by businesses in Argentina, Brazil and Mexico.

So life is a bit more complex than just one clear and reliable import duty – but thanks to it, more possibilities open up than you might ever imagine. That is why research is key, as well as local knowledge. Latin America is never simple or straightforward. But it can be hugely beneficial to your business if you are committed enough to it – right from the very initial research.

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Written by Gabriela Castro-Fontoura – Sunny Sky Solutions Associate of Strong and Herd LLP

Interested in this Article?  Check out this Special Event for September 2017 when Gabi makes a visit to the UK

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